The Constitutional Court handed down judgement on 29 August 2017 stating that new homeowners are not liable for historical municipal debts incurred by the previous owners of properties under Section 118(3) of the Local Government: Municipal Systems Act.
The matter was considered by the Constitutional Court after it received an application to confirm an order under section 167(5) of the Constitution and the City of Tshwane and Ekurhuleni appealed against a judgement handed down by the High Court of South Africa. The Constitutional Court consolidated these applications before the hearing took place.
The applicants in this matter were individuals who had recently purchased property and whose municipal services had been suspended and in some cases had also been refused clearance certificates until the historical municipal debt had been paid, in terms of Section 118(3) of the Municipal Systems Act.
A previous judgement handed down in respect of Section 118(3) had led the municipalities to interpret the Act as implying that new property buyers assume the historical debt incurred by the previous owners when they purchased new properties. The Act stipulates that a clearance certificate may only be issued to a new owner if the outstanding debts for the two years preceding the date of the sale are paid.
However, the interpretation of Section 118(3) was recently heard by the High Court in Pretoria, which declared Section 118(3) invalid.
The Section and its interpretation
Section 118(3) of the Local Government: Municipal Systems Act stipulates:
“An amount due for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties is a charge upon the property in connection with which the amount is owing and enjoys preference over any mortgage bond registered against the property.”
The Constitutional Court pointed out that where any doubt exists about the meaning of a section, it must be interpreted in agreement with the spirit, purport and objectives of the Bill of Rights. The question is thus whether the values and rights in the Constitution indicate that the Section 118(3) charge on property survives transfer to a new owner. Furthermore, is there public interest that would warrant a constitutional need or fair justification for interpreting the charge in Section 118(3) to survive transfer?
The Court pointed out that there would be severe consequences if one were to impose historical debts on new homeowners. The Bill of Rights prohibits arbitrary deprivation of property and new property owners have interests that would be adversely affected if they were subjected to transmissible charges.
Further, there is no logic in attempting to recover monies from a third party that was not involved in accumulating the debt, instead of recovering it from the actual debtor. The Court therefore concluded that if the charge in Section 118(3) survives transfer, there could be significant deprivation of property; this would not be in agreement with the rights enshrined in the Bill of Rights.
The Constitutional Court emphasised in its judgement that Section 39(2) instructs us to promote the spirit, purpose and objectives of the Bill of Rights when we interpret legislation. To avoid unjustified arbitrariness, which violates Section 25(1) of the Bill of Rights, we must thus interpret Section 118(3) of the Act to imply that the charge it imposes does not survive transfer.
It also follows that it is not necessary to confirm the High Court’s declaration of invalidity because the provision can properly and reasonably be interpreted without constitutional objection.
In simple terms, the Constitutional Court declared in a unanimous judgement, written by Justice Edwin Cameron, that a new owner of a property is not liable for the debts that accrued before transfer. The Court declined to confirm the High Court’s declaration of constitutional invalidity, but noted that the applicants won the appeal in practical terms as the declaration favours them. The respondents were ordered to pay the costs.
Implications of the judgement
The applicants complained that withholding municipal services, which left new homeowners with no water, electricity and other basic services, was inhumane. But this ruling assisted in stopping the practice.
Furthermore, homeowners no longer need to fear that they may be held liable for historical debts that they did not personally incur and have their municipal services terminated for not paying it. The ruling ultimately encourages the active buying, selling and ownership of property.